THE EFFECT OF EXTERNAL DEBT ON THE ECONOMIC GROWTH OF NIGERIA 2000-2018

Authors

  • Uzoamaka Gloria Chris-Ejiogu Department of Financial Management Technology, Federal University of Technology Owerri, Imo State, Nigeria
  • Njoku Charles Odinakachi Department of Financial Management Technology, Federal University of Technology Owerri, Imo State, Nigeria
  • Awa Stanley Kalu Department of Financial Management Technology, Federal University of Technology Owerri, Imo State, Nigeria

DOI:

https://doi.org/10.53555/eijbms.v5i4.90

Keywords:

External, Debt, Economic, Growth, Nigeria

Abstract

This study examined the effect of external debt on the economic growth of Nigeria. Secondary data was used for the study and it was obtained from the financial statement of the Central Bank of Nigeria for the period 2000-2018. The unit root property of the data was analyzed using the Augmented Dickey Fuller Test (ADF) and the variables were all stationary at level. In absence o cointegration Ordinary Least Square regression analysis was used to examine the effect of the independent variables on the dependent variables of the model. The statistical significance of the estimated parameters is checked by an F-test of the overall fit. The result of the regression analysis revealed that External Debt Stock (EDS) has a positive and statistically significant (p<0.05) effect on Economic Growth in Nigeria.  This is against a priori expectation. Debt Service Payment (DSP) was found to have a negative effect on Economic Growth and the relationship is statistically significant (p<0.05) but not in line with a priori expectation. Government Expenditure (GEX) was found to have a positive effect on Economic Growth and the relationship is statistically significant (p<0.05) and in line with a priori expectation. The value of the R-squared (0.854830) indicates that about 85.48% of the total variation in the dependent variable is explained by the independent variables. Also given that the probability value of the Fstatistic (0.000002) indicates that the independent variables of the study statistically predicts the dependent variable of the study. It was concluded that external debt has not been well utilized in Nigeria. It was recommended among others that external debts should be contracted solely for economic reasons and not for social or political reasons. This is to avoid accumulation of external debt stock overtime and prevent an obscuring of the motive behind external debt.

References

. Abubakar, S. (2010). External Debt and Nigerian Economic Development: An Empirical Investigation. International Journal of Economic Development Research and Investment. Vol. 2(1) pp 171-183.

. Adepoju, A. A, Salau, A. S. and Obayelu, A. E. (2007). The Effects of External Debt Management on Sustainable Economic Growth and Development: Lessons from Nigeria, Ibadan: MPRA Paper, University P of Ibadan.

. Adesola, W. A. (2009). Debt Servicing and Economic Growth in Nigeria: An Empirical Investigation, Global Journal of Social Sciences, Vol.8, No.2, 1-11

. Adejuwon, K. D, Kehinde, J. S, and Soneye, O. A. (2010). Debt Burden and Nigerian Development. Journal of Business and Organisational Development. Vol.2. pp 102-113.

. Ahmed, A. (1991). Debt Management and Nigeria’s Balance of Payment. CBN Bullion, Vol.10 (4).

. Ajayi, L. B. and Oke, M. O. (2012). Effect of External Debt on Economic Growth and Development of Nigeria. International Journal of Business and social Science. Vol 3(12). pp 297-304

. Ajayi, S. I. and Oke, M. O. (2012). Debt Overhang and Debt Forgiveness: The case of the severely-indebted low income countries of sub-Saharan Africa. Journal Economic Management. Vol. 5(1), January.

. Akpa, A. (2008). Public Finance and Budgeting: Issues, Imperative and Challenges from Nigerian Perspective. Ibadan, Nigeria: Spectrum Books Limited.

. Ayadi, F.S. and Ayadi, F. O. (2008). The Impact of External Debt on Economic Development: A Comparative Study of Nigeria and South Africa. Journal of Sustainable Development in Africa. Vol.10, No.3, pp 234-244.

. Ayodele, T.D. (2012). Nigerian Debt Burden and the Bogey of Debt Serving. Journal of Management and Corporate Governance. Vol. 4, PP 41-46

. Ahmed, A. (1984). Short and Medium term approaches to solving African Debt Problems. Central Bank Nigeria Bullion. Vol 12(22).

. Aluko, F and Arowolo, D (2010). Foreign aid, the Third World’s Debt crisis and the Implication for Economic Development: The Nigerian experience”, African Journal of Political Science and International Relations, Vol. 4(4), pp. 120- 127, April

. Ezeabasili, V. N. (2006). Nigeria External Debt: Past, Present and Future. The Certified National Accountant, 14(1) 25-43.

. Gana, J. M. (2002). Nigeria’s External Debt: Causes and Implications. Paper presented at National Center for Economic Management and Administration, Ibadan.

. Jaja, S,A, and Momodu, A. A. (2003). The Impact of Monetary Policies on the Performance of Indigenous Financial Organisations. Nigerian Journal of Management Sciences, Vol. 4, No.2, pp 157-187.

. Obademi, O.E. (2013). External Debt and Nigeria’s Economic Growth Nexus: Matters Arising. Journal of Poverty, Investment and Development, Vol. 1 Pp 22-28.

. Osinubi, T.S. and Olaleru, O.E. (2006). Budget Deficits, External Debt and Economic Growth in Nigeria. Applied Econometrics and International Development, Vol. 6, No. 3, pp 27-32.

. Ogwuma, P.A. (1996). Revitalizing the Manufacturing Sector in Nigeria. Central Bank of Nigeria. A selection of Essays/Speeches by the Governor.

. Ogbeifun, M.I (2007). The Politics of External Debt Relief: Nigeria’s Unique Experience. African Journal of Stability and Development, Vol 1, No 1.

. Ogege. S. and Ekpudu, J. E. (2010). The Effect of Debt Burden on the Nigerian Economy. Journal of Research in National Development. Vol. 8, No.2

. Sanusi J.O. (1987). Nigeria’s External Debt: Genesis, structure and Management. The CBN Bullion Vol.11 No.3 Summers, L. (1986). Debt problems and Macroeconomic policies: Symposium sponsored by the FED, Kansas City.

. Sanusi, J.O. (1998). Genesis of Nigeria’s Debt Problem and Prospects for Debt Conversion, CBN Economic and Financial Review. Vol. 26, No. 2, June.

. Soludo, C.C. (2003). Debt Poverty and Inequality in Okonjo Iweala, Soludo, and Muntar (Eds), the Debt Trap in Nigeria, Africa World Press NJ, pp. 23-74.

. Smyth and Hsing (1995). The Federal Government Debts Impact on Economic Growth. International Journal of Economic Development Research and Investment, Vol.2 No. 1 pp 171-183.

Downloads

Published

2019-12-27

Issue

Vol. 5 No. 4 (2019): EPH - International Journal of Business & Management Science (ISSN: 2208-2190)

Section

Articles

License

Copyright (c) 2019 EPH - International Journal of Business & Management Science (ISSN: 2208-2190)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.